Clean chit to LIC of India – Transfer of profits case : IRDA

Insurance Regulatory and Development Authority (IRDA) on Friday gave a clean chit to Life Insurance Corporation of India , the largest insurance company in India, in alleged violation of rules pertaining to transfer of profits among its various schemes.
The insurance watchdog earlier said it would launch investigation in to the books of LIC pertaining 2009-10. J Harinarayan IRDA chairman said there is no violation committed by the LIC and it was just an actuarial shortage as to the current actuarial estimates.

An investigation done earlier by IRDA revealed that there was deficit of around Rs 14,000 crore in one account covering annuity policies that offered high assured returns. “This is not a real cash shortage. It is an actual a shortage basically means they will project the gap between the liabilities and assets assuming a certain pattern of liability and assuming a certain generation of income from the investments made,” he told media persons after a function organised by IIRM here.

He said the LIC generates a lot of surplus which technically belong to share holders. “The LIC is used to meet the shortfall with this cash flow. It is entirely possible in the years to come that this imbalance will be rectified. So at the moment it is not a cause of concern and these figures are disclosed in their annual account,” Harinarayana said.

LIC, in a statement, earlier said the deficit is only a notional actuarially estimated figure for a period of over 20 years as different from a financial deficit or an investment loss. Replying to query, he said the IPO draft guidelines for non-life insurance companies have been sent to SEBI for comments.